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Drawings outweigh profits at Lawrence Graham

4 February 2013 | By Sam Chadderton

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Lawrence Graham’s (LG) annual property bill is costing the firm £5.1m a year, according to the firm’s latest LLP accounts.

The accounts confirm that turnover for 2011/12 fell from £58m to £56m and operating profit before any payment to partners slumped 31 per cent from £20.7m in 2010/11 to £14.2m in 2011/12.

The firm saw more money going out than it made, with the profit figure dwarfed by the firm’s drawings, as members took out £21m in 2011/12.

The figures suggest a higher repayment rate has kicked in over the past year, with operating leases going up from £2m to £4.2m.

Preliminary figures, reported in The Lawyer UK200, showed a fall in profit for 2011/12, with net profit halving to £8.3m and profit per equity partner dropping 26 per cent from £412,000 to £303,000 compared to the previous financial year (19 October 2012).

The accounts showed that the firm agreed £4.5m in new loans during 2011/12, having repaid £4.1m the previous year. Transactions with partners saw £21.2m paid out – up from £17.7m in 2010/11.

This meant that at the financial year end, total partners’ interests including loans and other debts due was reduced to £19.1m from £27.3m.

At 30 April 2012, partners’ capital in the firm was £11.3m, with LG saying it continues to use what it believes is an “appropriate mix of both debt and partners’ funds” to provide working capital for the business.

According to the LLP accounts, LG’s net debt at 30 April 2012 was £7.5m, up from £4.2m the previous year. Total bank loans are now at £9.3m, up from £5.5m.

The drop in turnover and profitability came during a year when average staff numbers remained stable. The firm has 186 lawyers and 136 support staff.

Managing partner Hugh Maule has previously said LG is getting closer to finding a solution for its property costs (25 July 2012).

In the 2011/12 review of the business, the firm highlighted its instruction on the merger between Russell Jones & Walker and Slater & Gordon, and also said its international turnover was experiencing healthy growth.

In 2011/12, 42 per cent of total revenue was from international client work and revenue from the Dubai office grew by 40 per cent.

The real estate practice was up 4 per cent and dispute resolution group was up by 6 per cent year-on-year.

The firm said in the accounts: “The fall in profitability was more principally due to increased property costs in London and occupying more space than we need. To mitigate this steps are being taken to let surplus space.”

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Readers' comments (8)

  • Anon | 4-Feb-2013 2:03 pm

    Ouch. These figures don't make for comfortable reading. I can see why LG would be looking to consolidate with another practice, share space and save costs. On the face of it, FFW would make sense given it is looking to move locations. Perhaps LG is now turning it's attention to alternative players also looking to move premises to help mitigate the exposure to lease costs?

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  • Peter | 4-Feb-2013 2:58 pm

    Serious stuff. Where is the money for extra drawings coming from in the absence of cash reserves? Capital contributed, LLP loans, the sale of assets?

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  • Walter | 4-Feb-2013 3:54 pm

    I think the question has to be asked by existing partners and staff is whether this is really a firm worthy of my practice - surely no one could confidently predict that LG will remain in its current state for very long. I also wonder whether they have the management expertise required to steer the ship through pretty stormy waters?

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  • Cheapskate | 4-Feb-2013 3:54 pm

    Isn't the solution to this problem (and it's not unique to LG, but all firms to some extent) for law firms not to set up shop in fancy, expensive offices in the most attractive parts of the most expensive cities in the world?

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  • Edward Collins | 4-Feb-2013 4:27 pm

    Yes and in addition to not setting up shop in an expensive office, perhaps devoting a whole floor of that expensive real estate to being an underused staff cafeteria was perhaps a step too far?

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  • Chris G | 4-Feb-2013 5:41 pm

    Surely these guys are speaking with DWF?

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  • John smith | 5-Feb-2013 10:32 am

    They must be in talks with other firms. Guaranteed someone else will swoop in and save the day, just like the Cobbetts deal. Just the same, I agree with that other poster - why would they spend so much on their premises? Of course, they aren't even in the most expensive part of town - their in some no-man's-land next to London bridge. No other law firms are there; they all want to be in the city where clients expect them to be.

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  • anon | 5-Feb-2013 12:45 pm

    So then john smith - where do you think Norton rose are? Are you not also forgetting where PWC and ernst and young and terra firma are based? ShowingyShowingyour ignorance much?

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